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With rates increasing, loan refinancing decreasing, and fewer affordable homes on the market, lenders may face some challenges in 2017 to generate business. Challenges that can be overcome with an eye toward purchase business, an expansion of products available for home financings and a trained staff to originate quality loans.
Many companies have introduced new, online, automated verification systems that should aid lenders in reducing processing turn times, loan data defects and loan origination costs. Additional tools available to aid lenders in their quest for profits in 2017.
Fannie Mae’s new Day 1 Certainty Program offers lenders the chance to obtain relief from certain income, employment and asset information reps and warrants when utilizing an approved verification provider. This should certainly (excuse the pun) aid lenders when selling their loans to Fannie. But what about those who don’t?
They can still benefit as well by using these third party verification vendors. Time spent in the gathering, review and validation of this information can be drastically reduced, with more dependable results. These results will also aid in the streamlining of the pre and post-closing reviews, again saving time and money.
Concentrating on the manufacture of quality, compliant loans in 2017 will be paramount. With fewer loans available, every loan originated must count. There won’t be much wiggle room for fallout, or loss, resulting from poor quality loans.
FHA’s most recent Lender Insights reports that lenders are still having a tough time with defects. Between July and September of 2016, FHA performed 5973 Post Endorsement Technical Reviews. They found that the defect rate increased from the previous quarter to 53% from 50%. For the loans reviewed they found the following:
- Conforming 1363 22.8%
- Deficient 1396 23.4%
- Mitigated 2474 41.4%
- Unacceptable 740 12.4%
The top 5 defects found were:
- Form 92900 A not properly completed or missing
- Unacceptable, unsupported or insufficient source of funds
- URLA nor properly completed or missing
- Defects related to assets derived from gifts
- Income improperly documented.
You’ll note that only the last one (#5) has to do with the verification process.
So, although automated verifications may help, lenders still need to ensure that processes and procedures are in place to fully and compliantly originate their loans. Poor quality loans are a recipe for disaster.
With the additional time and money it costs to correct defects comes the delays encountered in loan fundings, with the added risk for loan rejections, indemnifications, and buybacks. Risks no lender can afford to take at any time, let alone in 2017.
Make your number one 2017 New Year resolution to reduce loan defects
